At Fancy Hostels, Business Travelers Are Replacing Backpackers

While every hotel brand under the sun makes moves to attract millennials, hostels are doing the very opposite. They’re growing up, getting fancy—and even catering to design-minded business travellers.

In fact, forget everything you think you know about hostels. Forget the dirty common rooms in Greece, the creaky Wi-Fi in Budapest, and the floors sticky with spilled beer in Berlin. Pretend they never happened.

Today’s best hostels are smartly designed—some by internationally recognized names. They have both shared and private rooms. They have rooftop pools and tapped-in concierges (who also happen to stand behind the front desk). One even has the best bar in the U.S.

“When we originally started Freehand [in 2012], it was a little bit of an experiment,” said Andrew Zobler, founder and chief executive officer of the first high-end hostel brand in the U.S.

“I had a lot of nostalgia about coming of age in New York—having a summer house in the Hamptons or Fire Island, sharing my summer experiences with a bunch of friends. That was some of the most fun I’ve ever had in life,” Zobler recalled. The idea of Freehand was to recreate the convivial, communal spirit of his Hamptons summers.

Fast forward four years, and his concept has taken off: The company opened a property in Chicago last year and has another two locations on the way, one in Los Angeles (schedule to open by January) and another in New York (slated for fall 2017). His guests are only sometimes backpackers on a budget. Often they're groups of friends, families, or “international travelers who are seeking an experience—even if they could have stayed in places that were much more expensive.”

Many other upscale companies have also found a groove with higher-end travelers, helping hostels outpace many other hospitality sectors.

There’s the fast-growing Generator, with 14 properties across Europe, many in adaptive reuse buildings; Wombats in such central cities as Berlin and Vienna; Clink in London and Amsterdam; and Meininger, an arm of the luxury travel operator Cox & Kings. Just as independent “lifestyle” hotels have popped up around the globe, so too have independent “poshtels,” with one-off properties from Portugal's Porto, to Rome, to Istanbul. According to Frederik Korallus, CEO of Generator, fewer than 1 percent of hostels are branded, and his group is “a big chunk of that.”

The sudden proliferation of these high-end hostels has caught the attention of travelers from all walks of life.

According to global data from Hostelworld, a Dublin-based booking engine, 9.3 percent of bookings are made by travelers age 41 and up; another 20 percent are between 31 and 40 years old. The most robust demographic at hostels in 2016 is not teens and backpackers fresh out of college; it’s young professionals in their late 20s. (They represent a bit more than 40 percent of hostel guests.) For those who are traveling alone, a hostel offers a more convivial work-trip experience than your average, corporate budget-approved Westin.

“We’re not just seeing the low end of millennials at our hostels,” said Generator’s Korallus, “but also Gen Z, families with several kids, creative professionals—design, fashion, IT, software-development folks—and even empty nesters.”

Often, vibrant common spaces double as creative co-working environments, facilitating a creative exchange that might not be possible in a board room. In Stockholm, for instance, Generator’s new property has beautifully designed common spaces for local companies, such as Spotify, to hold workshops with visitors or throw record launches.

Many hostels also provide a last resort when cities are saturated by big conferences. Of the 30 reviews posted on TripAdvisor from business travelers to the year-old Freehand Chicago, many said they were forced into their choice.

Gil Takemori was planning a trip to Chicago for the National Restaurant Association’s annual conference when he found that all the hotels nearby were price gouging, if they weren’t already sold out. He told Bloomberg that he opted to try the Freehand “as a new experience” and would consider giving it another try, citing its amazing location and social benefits.

David Smith, who runs the tech podcast SurfaceSmiths, found himself in similar shoes.

“The Freehand was 80 percent cheaper than the hotel I was attending a one-day conference at,” he said, “and as an independent business person, the money I save goes directly to my bottom line.” Smith gave the hotel five stars; Takemori gave it four. Both, it seems, were pleasantly surprised.

“The industry has changed hugely in the six years I’ve been here,” said Paul Halpenny, global director of supply at Hostelworld, who spent the majority of his career at mainstream hotel brands such as Sheraton. “I wouldn’t have touched the hostel business in my earlier years, but it’s a high-end product now. Now the only thing we don’t have at hostels is room service.”

To his point: Roughly 80 percent of nonmillennials register satisfaction with their stays, while only about 5 percent express dissatisfaction. This is, after all, the age of Airbnb, where travelers prioritize value and experiences rather than beds. In his bullish assessment, Halpenny even suggests that hostels may be just as much of a threat to lifestyle hotels as the apartment-sharing service that’s maligned by general managers.

“We’re seeing Marriott and Hilton creating brands that I think are designed to target the hostel audience. They’re going after that social aspect, appealing to the millennial audience. To me, that’s almost the biggest compliment.”